Buoyant KPN plots another share buyback

KPN began the week with some good news for its investors. The Dutch incumbent said it plans to return more than €850 million (US$948 million) to shareholders this year through a 5% increase in the dividend payment for 2022 and a new €300 million ($334.7 million) share buyback program.

The operator is clearly feeling pretty confident after what it described as a solid 2021 and the achievement of its full-year outlook. CEO Joost Farwerck declared that KPN had "continued to make good progress against our strategic and financial ambitions."

KPN noted that it achieved consistent mobile service revenue growth over the last three quarters and said its ambition is to broaden this trend to fixed service revenues in 2022.

Figure 1: Good call: Dutch incumbent KPN plans to return more than €850m to shareholders this year.
(Source: KPN)

"The underlying trend is already improving, as fiber broadband service revenue growth is offsetting the copper decline," the operator said.

In the fourth quarter of the year, adjusted earnings before interest, taxes, depreciation and amortization after leases (EBITDA AL) increased by more than 4% year on year to €584 million ($651.5 million).

Adjusted revenue in the October-December period rose just 0.3% to €1.36 billion ($1.52 billion). The operator also closed the quarter with a lower net profit of €157 million ($175 million), down 9.7% from the previous year.

In the full financial year, adjusted EBITDA AL increased by a somewhat lower rate of 1.2% to €2.35 billion ($2.6 billion) while revenue fell 0.3% to €5.25 billion ($5.86 billion). However, KPN posted a much higher net profit of €1.28 billion ($1.43 billion), mainly owing to a €651 million ($726 million) payment relating to its Glaspoort joint venture.

Glaspoort is the fiber network joint venture established with pension provider APG that became operational in June 2021.

Looking ahead, KPN has set its adjusted EBITDA AL outlook for 2022 at €2.4 billion ($2.68 billion). Capex is expected to remain stable at €1.2 billion ($1.34 billion) and the free cash flow outlook is set to more than €825 million ($921 million).

CFO Chris Figee also said KPN is well shielded against high inflation in 2022.

"While we do see some inflationary pressures from rising costs, we expect to be able to mitigate most of this, as the majority of our revenues have some sort of CPI linked features in place. Therefore, we target no material impact on our EBITDA as lower cost savings are expected to be offset by our revenue growth," he said.

"Regarding capex, we have limited exposure to inflating outsourced labor costs as our fiber rollout capacity has been contracted for the coming years with no link to inflation."

Figee said there may still be some downside risks linked to supply chain shortages, but indicated that KPN will keep a strict eye on capex to ensure it does not exceed €1.2 billion.

Speedy fiber

Farwerck also noted that KPN was able to massively accelerate its fiber rollout in 2021.

"We added a record number of households to our fiber footprint … and we are well on track to deliver 80% coverage of Dutch households by 2026," the CEO said.

“Fiber is clearly at the heart of our strategy to create long-term value for all stakeholders,” Farwerck said.

In 2021 as a whole, KPN added 545,000 households to its footprint, taking the total to more than 3.4 million households. Around 74,000 households were covered by the Glaspoort venture. KPN also said it activated 238,000 households on its own network, taking the total to 1.64 million.

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In December 2021, KPN, APG and Glaspoort signed an agreement to extend the scope of the Glaspoort fiber rollout by about 170,000 households. KPN will receive a payment of around €170 million in return.

In terms of its mobile network, KPN has been offering 5G services since 2020. However, it noted that "in order for customers to enjoy the full 5G experience, the 3.5GHz band needs to be in use. The auction of this spectrum has been delayed, and is now likely to take place after October 2022," the operator said.

The Dutch government has already auctioned 700MHz and 1400MHz spectrum and relicensed the 2100MHz airwaves that operators originally bought for their 3G services.

However, the planned auction for 3.5GHz 5G mobile frequency licenses has been delayed due to the ongoing legal dispute with satellite operator Inmarsat, which uses the spectrum band for maritime safety and distress services.

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— Anne Morris, contributing editor, special to Light Reading